Legal Question in Real Estate Law in California

One could attempt to make the argument that the loan is a "community obligation" - in otherwords a debt incurred while the couple was married. The problem is, it was a refinance of a non-community debt - one that existed before the marriage. Frankly, this is going to end up being a question better asked of a family law attorney, as the only real "hook" the father has to his daughter is a legal concept which is derived from family law. Under contract law, unless she contractully agreed to repay the loan, there is no question that she is not liable for the loan. To be clear - that later point is only from a contract position, and ignores the potential of a community obligation.

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Here's your answer from a family law attorney. Since it was incurred after marriage, it is a community debt. That means it's complicated. She is not directly liable, but her community property income and assets are reachable to enforce and collect the debt. To add a further twist, because it was benefitting his separate property, to the extent the debt was paid down (but not the interest) the community acquired a right of reimbursement from his separate property assets.

Further twists might be introduced depending upon the nature of the agreement, i.e., whether the father-in-law's loan is oral, in writing as an unsecured loan, or secured by the land via a deed of trust.....three possibilites, each with different prospects should litigation occur.

An oral contract that is clearly not to be performed within one year is invalid unless it, or some memorandum thereof, is in writing. Statute of Frauds, Civil Code section 1624(a)(1). There are ways to circumvent a Statute of Frauds defense, but sometimes it holds up. See Swift v. Swift (1873) 46 Cal. 266.

Also, a suit on an oral contract must be commenced within two years of the claimed breach. This also could affect a future suit to enforce the loan against anyone.

If the loan was secured by a deed of trust, there is likely to be a defense based upon the collateral-first and antideficiency laws. This alone may be enough to shelter the wife from liability, but apply the laws carefully, because some of them are designed for homes and don't apply to loans secured by bare land.

Finally, if the loan is in writing, and the writing references that it is made to refinance a land purchase, but the writing does not amount to a more-or-less conventional note and deed of trust, the writing might be deemed an equitable mortgage that would have to be foreclosed in a court proceeding (judicial foreclosure).

I agree with the preceding answers regarding the family law (community property) aspects of the situation, and as to them I would only add that if community-property funds such as wages and salaries of either spouse have been used to pay down a mortgage, the community has acquired a fractional ownership interest to the extent of the principal payments made.